‘Now is not time to buy core assets’

The global asset market has lost steam amid the prolonged global economic slowdown, and the Korean market situation is not faring much better.

But this does not mean investors should wait until the mist clears, according to a top strategist at the U.S.-based LaSalle Investment Management.

“Now is not time to buy core ― it is very expensive,” said Paul Guest, Asia-Pacific head of research and strategy of the company, in an email interview with The Korea Herald. 

Paul Guest

“But there are plenty of near-core and value-added opportunities that could suit, given the abundance of Korean real estate capital moving overseas,” he said, pointing to the country’s sovereign, pension and insurance funds.

The property strategist has had over 10 years of direct and indirect real estate experience, as former global head of capital market research for Jones Lang LaSalle and former chief European economist for Moody’s Investors Service.

He recommended investment in logistics and business hotels in Korea during his recent visit to Seoul for investor relations.

The crash landing of an Asiana Airlines jetliner on July 6 put a dent in tourism numbers in the short term, but “investors looking at a medium or long-term hotel investment should be considering longer-term factors,” he said.

He added that regional or global diversification of asset portfolios has become a necessity for Korean institutional investors.

“For major Korean institutions, real estate should form part of their portfolio, if they do not already,” he said.

Investment in Southeast Asian properties has gained popularity among Korean financial institutions that seek overseas expansion. But the region is not uniform in market maturity, Guest warned, calling for careful selection of operating partners.

For instance, Singapore is a mature market, dominated by domestic investors, and heavily securitized, he said.

But the markets of Indonesia and Vietnam are relatively “immature, only gradually opening to foreign investment,” while Myanmar‘s property investment market is still in its fledgling stages, he noted.

“My advice to institutional investors looking at these markets is to select operating partners carefully: Detailed local knowledge is vital and will make or break the investment,” he said.

He also predicted that Japan’s attempts for major structural reform will exert significant influence on Korean investment.

While he felt Abenomics could potentially provide a renewed growth driver to Asia, even as China is slowing, Guest emphasized that such an attempt is “thus far no more than additional stimulus and optimism.”

Abenomics still has “considerable political challenges to overcome,” Guest said. The structural reforms, “necessary to make growth self-sustaining and to drag the economy out of the deflation pit, are only just being discussed.”

The strategist expected that the growth trend, which has slowed across the Asia-Pacific region, will continue, although growth is slowly picking up in the developed markets.

“Global interest rates are starting to rise, as is volatility with an uncertain exit path from quantitative easing,” Guest said. “This is impacting on the perception of property, with the real estate investment trust markets already experiencing considerable volatility.” 

By Chung Joo-won (joowonc@heraldcorp.com)